Government Actors Subject to Equitable Claims After Deep Tunnel Ruling

Aug. 9, 2013 – The Deep Tunnel that prevents wastewater from polluting Lake Michigan is damaging Milwaukee buildings, and now the Milwaukee Metropolitan Sewerage District (MMSD) must pay to fix it, the Wisconsin Supreme Court has ruled.

Along the way, a 4-2 majority in Bostco LLC v. Milwaukee Metropolitan Sewerage District, 2013 WI 78 (July 18, 2013), ruled that municipal entities “may be subjected to claims for equitable relief to abate a negligently maintained nuisance,” despite a state law that limits damages against government actors to $50,000 per claimant.

For MMSD, abating the current nuisance that is causing Boston Store’s foundation to deteriorate may cost in excess of $10 million, according to MMSD court filings.

The Deep Tunnel, a 19-mile system of underground sewers in Milwaukee that took nine years to build and started operating in 1993, allows excess polluted runoff water and sewage to be stored underground until reclamation facilities can treat it.

Around 2004, Bostco LLC and Parisian Inc. (Bostco) – which own five interconnected buildings that house downtown’s Boston Store – discovered that building foundations were deteriorating. The buildings rest on a foundation of wood pilings underground.

Saturated by water, wood pilings can last hundreds of years, and Boston Store’s pilings were placed below Milwaukee’s water table when constructed in the 19th century.

Bostco alleged that the MMSD’s negligent maintenance and operation of the Deep Tunnel caused groundwater to seep into the tunnels, lowering the water table around Boston Store’s buildings and exposing its wood pilings to air and deterioration.

Bostco wanted damages based on negligence and negligent maintenance of a known nuisance, and it wanted the MMSD to “abate the nuisance,” an equitable claim. In addition, Bostco said the MMSD took its groundwater without just compensation.

The MMSD argued that Bostco’s negligence and nuisance claims were barred by governmental immunity, and Bostco failed to give proper notice of the claims. It said Bostco has no takings claim and any tort damages that are awarded must be capped.

Ultimately, a jury awarded Bostco $6.3 million in damages, but the trial court judge reduced the damages to $100,000 ($50,000 per claimant) pursuant to Wis. Stat. section 893.80(3), which caps tort damages in suits against government actors.

The trial court also ruled that the MMSD must abate the nuisance, but an appeals court later reversed, concluding that the damages cap bars the abatement relief sought.

While the supreme court majority agreed that Bostco’s damages are capped, it ruled that the MMSD must abate the private nuisance caused by negligent maintenance.

The majority remanded the case for a hearing to determine whether the MMSD must line the Deep Tunnel with concrete to stop groundwater leaks affecting the Boston Store property, or whether an alternate method can fix the problem.

MMSD Has a Duty to Abate

The majority rejected the MMSD’s claim that it was immune from suit under Wis. Stat. section 893.80(4), which grants immunity for so-called discretionary acts – “acts done in the exercise of legislative, quasi-legislative, judicial, or quasi-judicial functions.”

“Because MMSD’s maintenance of the continuing private nuisance is not a legislative, quasi-legislative, judicial, or quasi-judicial function, MMSD is not entitled to immunity,” Justice Patience Roggensack wrote for the majority.

The majority agreed that the damages cap still applied. But it ruled that the damages cap does not bar a party’s ability to obtain equitable relief. An appeals court had ruled that requiring the MMSD to abate would render the cap “superfluous.”

“Without any language in § 893.90(3) to suggest a limitation on equitable relief, we decline to read in any such limitation,” Justice Roggensack wrote.

The MMSD had a duty to abate because it was maintaining a private nuisance and had notice that the nuisance was causing significant harm, the majority explained.

“This duty arises from the longstanding rule that generally municipal entities are not shielded from liability for maintaining a private nuisance,” Roggensack wrote.

“[W]e reach the ineluctable conclusion that a municipal entity may be subjected to claims for equitable relief to abate a negligently maintained nuisance that is a cause of significant harm and of which the municipal entity has notice,” the majority held.

Court Rejects Constitutional Challenge to Damages Cap

The majority rejected Bostco’s argument that Wisconsin’s damages cap under Wis. Stat. section 890.80(3) is unconstitutional, both facially and as-applied to Bostco.

Bostco had argued that the cap violates the Wisconsin Constitution’s equal protection clause, which grants all persons equal protection under the law.

Victims of government torts whose damages do not exceed $50,000 are made whole, but not victims, such as Bostco, who suffer damages greater than that, Bostco argued.

Facially, the law is sound, the majority ruled, because there is a rational basis for the damages limitation: to preserve sufficient public funds.

The majority also rejected Bostco’s as-applied challenge that there is no rational basis to treat its claims differently than Deep Tunnel-related claims that property owners secured against MMSD in the 1990s, before the damage limitations statute took effect.

Bostco forfeited its claim that MMSD took groundwater without paying just compensation, the majority ruled, because Bostco did not raise that particular argument sooner, at the circuit court. Bostco previously argued that MMSD took its wood piles.

The majority also rejected MMSD’s claim that the entire case should have been dismissed because Bostco did not properly serve MMSD with a notice of injury.

Concurrence and Dissent

Justice Michael Gableman wrote a concurring opinion. He agreed that MMSD should not be shielded from liability, but suggested a new test to determine if a government actor is immune from suit, one that distinguishes between planning and operations.

“The District is immune because the Deep Tunnel is being operated and maintained in the manner in which it was designed,” the chief justice wrote. “The majority opinion drastically and fundamentally increases government liability.”

Chief Justice Abrahamson suggested that the majority’s “new-found law” should only apply to tortious causes of action that arise after July 15, 2015, so public bodies can prepare for the financial obligations of this new liability.

“Delaying the effective date of an opinion that substantially increases government liability is not an original thought,” she wrote.